… has been in the news lately.
This link takes you to a blog I follow written by Patrick McKenzie that offers a payment expert’s perspective on what SWIFT is, together with Patrick’s personal view on what the sanctions are intended to achieve.
This short extract covers Patrick’s assessment of the objective of the sanctions
The intent of this policy has been described variously in various places. In my personal opinion, I think the best articulation of the strategy is “We are attempting to convey enormous displeasure while sanctioning some banks which are believed to be close to politically exposed Russians, while not making it impossible for Russian firms generally to transact internationally nor sparking a humanitarian crisis either inside or outside of Russia.”
One of the key insights is that SWIFT manages the messaging that accompanies international payments and facilities their processing, not the transfers of money per se. The sanctions do not make it impossible to transact with Russia, they mostly make it operationally very difficult and not really worth the effort, especially at scale. Especially if you are a regulated bank who cares about your long term relationship with your regulator.
Another nuance that does not always come through in the newspaper reporting of the sanctions is the extent to which the compliance functions in banks are under pressure to interpret and anticipate the intent of the regulatory sanctions
Many commentators confuse the actual effects of severing particular banks from SWIFT with what they perceive as the policy goal motivating it. More important than either is, in my opinion, what it communicates about commander’s intent to the policy arms who are responsible for enforcing it.
Specifically, it communicates that Something Has Changed and that Russian institutional money, specifically “oligarch” money, is now tainted, and not in the benignly ignored fashion it has been for most of the last few decades.
Where there is some doubt or ambiguity, banks are likely to err on the side of caution.
Patrick’s post is worth reading if you are interested in this particular aspect of SWIFT and his blog worth following if you are interested in payments more generally.
Tony – From the Outside